Budget 2018 Overview

Autumn Budget 2018: What It Means For SMEs

Unveiled exactly five months to the day before Britain pulls out of the European Union, 2018’s Autumn Budget set a positive tone for small and medium-sized enterprises up and down the country.

Taking place on Monday 29th October before the start of vital Brexit negotiations in early November, it pedals an optimistic view of business in general, and a drive to support SMEs and the high street in particular. Despite the economic uncertainty surrounding the UK’s exit from the EU, the chancellor Philip Hammond has strongly indicated that his budget promises will still be delivered come what may.

In the run-up to the Autumn Budget, the Confederation of British Industry (CBI) pushed Hammond to use this opportunity to shore up company preparations for a post-Brexit future, with a £2 billion package of measures to strength skills, raise investment, and lighten the heavy burden of business rates.

Having previously enjoyed top of the table growth amongst all of the other G7 member nations before June 2016, the UK has since suffered a sharp post-Brexit slump and is currently second bottom of the league. The chancellor was keen to extend a level of certainty in the run-up to March 2019 and beyond.

Business rates relief for small retailers

The Chancellor has promised to help smaller outlets and shops by cutting business rates for all retailers in England with a rateable value of £51,000 or less. This equates to a reduction in business rates for smaller businesses of around a third. Potentially this could signal an annual saving of up to £8,000 for up to 90% of all independent bars, shops, cafes, pubs and restaurants.

Additionally, Mr Hammond has announced £675m of extra funding to establish a “Future High Streets Fund” to support councils in drawing up plans for the transformation of their local high streets. The idea is that this will allow them to invest in the improvements they need and to facilitate redevelopment of under-used retail and commercial areas into residential.

Annual Investment Allowance

The chancellor has also raised the annual investment allowance from £200,000 to £1,000,000 for two years and has reiterated his commitment to looking at ways of increasing capital spending particularly across the technology sector.

The Annual Investment Allowance itself was introduced back in 2008. It means that businesses can write off 100% of qualifying capital expenditure (up to the prescribed limit) against taxable profits for the same period. It’s particularly aimed at small and medium sized businesses as it acts as an incentive for them to invest and therefore grow. This is achieved by bolstering the tax relief available, so it can all be claimed in the year of investment instead of over a number of years – perfect for aiding cash flow.

The AIA also makes tax easier to calculate. The vast majority of businesses in the UK have qualifying expenditure of £500,000 or less, so they can just write this off.

Entrepreneur’s Relief

Despite calls for it to be scrapped, Entrepreneur’s Relief will be retained but the minimum qualifying period is being extended from one year to two.

Apprenticeship Levy

Philip Hammond has also publicised his £695 million package to support apprenticeships and has addressed the Apprenticeship Levy which will be slashed in half for smaller firms. He has also made it easier for SMEs to access funds from the levy. The thinking is that by investing in skilled workers, new technologies and advanced equipment, the UK can strengthen its international trading appeal for the future.

VAT and Personal Tax Allowance

The VAT threshold for small businesses is to stay unchanged for two years, again to help alleviate uncertainty.

With regard to the Personal Tax Allowance, Hammond has raised the personal allowance tax threshold a year early, from 2020 to 2019.

From April next year, the personal allowance will be £12,500 whilst the Higher Rate threshold will be £50,000.

In conclusion, whether the Government’s vision of achieving ‘the end of austerity’ actually comes to fruition or not, there has at least been a thorough recognition of the challenges SMEs have faced since 2010. Clearly there is an appetite across Parliament to boost the hiring and training power of smaller firms with a view to enabling enhanced growth going forward.

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